Elme Communities

Greetings, and welcome to the IOM Community's second quarter 2024 earnings conference call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Amy Hopkins, Vice President, Investor Relations. Amy, please go ahead.

Good morning, and thank you for joining our second quarter earnings call. Today's event is being webcast with a slide presentation that is available on the Investors section of our website. and will be available on our webcast replay. Statements made during this call may constitute forward-looking statements that involve known and unknown risks and uncertainties, which may cause actual results to differ materially, and we undertake no duty to update them as actual events unfold. We refer to certain of these risks in our SEC filings. Reconciliations of the GAAP and non-GAAP financial measures discussed in this call are available in our most recent earnings press release and financial supplement, which was distributed yesterday and can be found on the investor's page of our website. And with that, I'll turn the call over to our President and CEO, Paul McDermott.

Thanks, Amy, and good morning, everyone. Presenting on the call with me today are Tiffany Butcher, our Chief Operating Officer, and Steve Freistadt, our Chief Financial Officer. Tiffany will provide an update on our operating trends and initiatives, and Steve will cover our balance sheet and outlook. Grant Montgomery, our Head of Research, is here to answer market-level questions during Q&A. I'll start today's call with a brief market-level overview. The Washington Metro is a top-performing apartment market this year, and the region remains one of the best-positioned apartment markets nationally. Across our submarkets, deliveries have peaked, and net inventory ratios have normalized in the low single digits. Our Washington Metro portfolio which comprises over 75% of our homes, is benefiting from strong, stable demand, allowing us to drive occupancy above our targeted level for the year. We believe we are positioned to capture growth in the second half of the year that will set us up well heading into 2025. Turning to Atlanta, absorption rates are accelerating, and the supply overhang continues to decline. In M submarkets, absorption is now nearly 60% higher than the pre-pandemic period. Our operating fundamentals are showing stability with modest improvement, supported by strong retention and renewal rates. Tiffany will provide more details in her remarks. While supply remains elevated, it is not expected to increase materially above the current levels in any of our submarkets. And we expect the overall level of demand relative to supply to continue to improve through 2025. Moreover, units under construction and new starts have declined significantly, pointing to better conditions in 2025 and a highly favorable supply-demand dynamics forecasted for 2026 and 2027. Our residents' financial health also remains solid. The rent-to-income ratio for new leases was 23% on average in the second quarter compared to 24% a year ago, reflecting a positive credit trend relative to rental rate growth. Employment trends remain stronger for middle-income wage earners relative to high wage earners, and the composition of job growth is shifting in favor of non-cyclical industries, which are two favorable trends for ELM. As of the second quarter, government was our largest industry exposure in the Washington Metro, and healthcare was our largest industry exposure in the Atlanta Metro. Affordability and relative value remain critical to our strategy, and our rent levels are several hundred dollars below both Class A rents and the cost to own a home in our markets. Move outs to purchase homes comprised just 8% of second quarter move-outs, well below the historical level in the mid-teens. Additionally, our retention rates remained historically high, averaging 65% year-to-date, as our value-oriented resident base tends to be stickier, with an average tenure of about 2.7 years. As we move forward, our focus on maintaining rent levels that are affordable for the largest and most underserved segments of the rental market, combined with our efforts to enhance the Class B living experience, should continue to attack strong and steady demand from value-conscious renters. And with that, I'll turn it to Tiffany to discuss our operating trends and growth initiatives.